Lehman Brothers Financial SA (LEHNQ)

[slimugrian]

Debt...

From Stephen G. Moyer’s book Distressed Debt Analysis. Published 2005 . Page 242.

BANK DEBT

The importance of knowing what is going on in the bank debt, if any is present, will depend on its materiality in the capital structure. To the extent that it is a relatively small facility that primarily provides working capital and would be effectively included in any post reorganization capital structure, it may be fairly irrelevant. Conversely, the larger the secured facility, the greater the need to know who is involved. Is it still the bank group or have other distressed investors accumulated stakes? In most cases, this usually will be a matter of public record because the bank agreement and any amendment thereto will be filed with the SEC and the signature pages will reveal the holders. However, this review is not totally reliable because it is possible for signatory to sell its economic interest to another holder through participation. In a participation agreement the buyer purchases the seller’s economic interest in and control over the bank debt, but the seller continues to remain the record holder. Often bank debt purchases are structured as participations specifically because the buyer does not want his or her identity known.

LARGE BLOCK HOLDERS OF PUBLIC DEBT

On the bond side, the process is more difficult. Regulators require mutual funds and insurance companies to disclose their portfolio holdings quarterly and annually, respectively. Thus, these holdings can be identified, but potentially out of date. Hedge funds are private investment pools that at present are subject to very little regulatory oversight and are not required to disclose their holdings.The presence of a significant concentration of holdings among mutual funds and insurance companies………continues about accumulating large blocks.

So, who owns Lehman debt??? I bet that Lehman has bought back through it’s subsidiaries and subsidiaries subsidiaries quite a significant stake of its own debt and paid pennies.

Across the globe you can find companies buying back their own debt from market. Take a look what Ford did:

“It gives them more time, and the timing was really good because it would be a lot more difficult if they borrowed money from the government,” said Mirko Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, which holds Ford bonds. “It’s always a great move when you can buy back your debt at 30 cents on the dollar.”

http://www.bloomberg.com/apps/news?pid=20601110&sid=a6TbfOmXg7vw